US workers and employers pay Social Security taxes to fund the OASDI program, which includes welfare initiatives for retirees, the unemployed, and children. Social Security and Medicare taxes are withheld from an employee’s paycheck, with workers paying half and employers paying the other half. Self-employed individuals pay the full tax. The Tax Relief Act of 2010 reduced the Social Security tax by 2% for 2011, but the Medicare tax remained the same. The maximum income available for Social Security and Medicare taxes is $106,800 USD for 2010 and 2011.
US workers and their employers pay Social Security taxes to fund the Old Age, Survivors and Disability Insurance (OASDI) program. The program, which also includes various welfare initiatives, assists retirees, the unemployed, children of deceased workers, and people who receive help from Medicare, Medicaid, welfare, and the State Children’s Health Insurance Program. Commonly known as Social Security taxes, taxes for these programs also require a separate Medicare tax, which is included in the total withholding established by the Federal Insurance Contributions Act (FICA). Regularly employed people will pay half of their Social Security taxes, while their employers pay the other half, but self-employed people pay the full tax, since they are both the employee and the employer.
Social Security and Medicare are the two main types of Social Security taxes. These two taxes are generally withheld from an employee’s paycheck together, but are considered distinct and separate parts. For 2010, the total Social Security tax was 12.4% of total income, while the Medicare tax was 2.9% of total income. Workers were responsible for 6.2% of Social Security income and 1.45% of Medicare income, while their employers paid the remaining half in each tax.
The Tax Relief Act of 2010 caused the Social Security tax to be reduced by 2% for the year 2011, but the Medicare tax remained the same. Workers in 2011 are responsible for 4.2% of Social Security tax revenue, while employers are responsible for 6.2%. Medicare tax is still 1.45% for each part.
Self-employed people must pay both parts of Social Security taxes, since they assume the role of employee and employer simultaneously. However, the Tax Relief Act still applies, so the self-employed pay a total of 10.4% of their income for Social Security tax and 2.9% of their income for Medicare tax to 2011. In 2010, the self-employed paid a total of 15.3% combined in Medicare and Social Security taxes.
Social Security taxes are separate from standard income taxes. The rate at which an individual is taxed for federal income tax varies by income level, but all workers pay the same percentage for Social Security taxes. Also, for 2010 and 2011, the maximum income available for Social Security and Medicare taxes is $106,800 United States dollars (USD). Unlike regular income tax, individuals will not be taxed by these programs on additional money earned after reaching the tax cap.
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